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Rebuilding Our Infrastructure

In a vitriolic campaign season, one of the few things that the candidates could agree on was their desire to see more spending on the highways, rail lines, ports and dams that make up our national infrastructure. Relatively early in the campaign season, Donald J. Trump met Hillary Clinton’s announcement of a huge infrastructure package, worth $275 billion, by announcing one that would be more than twice as big.

On election night, it was this promise, more than any other issue, that he returned to. “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” he said in his acceptance speech on Tuesday night.

Infrastructure is an appealing cause because it provides a straightforward way for the government to inject money into the economy and build the foundation for longer term economic growth. But some economists say returns from infrastructure spending are likely to be much less pronounced than they were in the past, in part because the highest yielding infrastructure is already in place. Looking at infrastructure data from different sources provides conflicting pictures of what needs to be done, but it is a topic worth examining from as many perspectives as possible.Related Article

Shortfalls in Infrastructure Spending

Every few years the American Society of Civil Engineers puts out a widely distributed report card for our national infrastructure. In 2013 the overall grade was a D+. There are reasons to take the grim picture presented by the report card with a grain of salt: The group has an interest in making the country’s infrastructure situation look as bad as possible, so that more civil engineers are hired to fix it. But the report card provides one of the most comprehensive snapshots of where we are, and are not, spending money, and where the needs are likely to be the greatest in the coming years.

Infrastructure needs through 2020 versus

amounts funded by 2013

In billions of

2010 dollars

AMOUNT

FUNDED

AMOUNT

NEEDED

Surface

transportation

$877

$1,723

629

736

Electricity

120

391

Schools

Public parks

& recreation

134

238

95

134

Airports

Water/wastewater

infrastructure

42

126

89

100

Rail

8

80

Levees

Hazardous &

solid waste

10

56

Inland waterways

& marine ports

14

30

6

21

Dams

Infrastructure needs through 2020 versus amounts funded by 2013

In billions of 2010 dollars

Inland waterways

& marine ports

Dams

$30

Levees

$21

$80

$14

Electricity

$6

$736

AMOUNT NEEDED

$8

Public parks & recreation

Water/wastewater

infrastructure

$238

$126

$629

AMOUNT FUNDED

$42

$134

Surface transportation

$1,723

Schools

$391

$120

Airports

$134

Rail

Hazardous &

solid waste

$100

$877

$56

$95

$89

$10

Infrastructure needs through 2020 versus amounts funded by 2013

In billions of 2010 dollars

Inland waterways

& marine ports

Levees

$30

Electricity

$80

$14

$736

AMOUNT NEEDED

Dams

$8

$21

$6

Water/wastewater

infrastructure

$126

$629

AMOUNT FUNDED

$42

Surface transportation

$1,723

Hazardous &

solid waste

$56

$877

$10

Airports

Schools

$391

$134

Public parks & recreation

$238

$95

Rail

$100

$120

$89

$134

The New York Times|Source: American Society of Civil Engineers

Quality of U.S. Infrastructure

To get a sense of how the quality of America’s infrastructure has changed over time — and how it compares with infrastructure in other countries — one of the best tools available is the World Economic Forum’s survey of global executives. It is worth remembering that these figures come from a survey of the most powerful members of society, not the poor, who might experience the shortcomings of our infrastructure more intimately. But the figures suggest that America’s infrastructure still stands up quite well to international comparison and is not in precipitous decline.

Global executives opinions of infrastructure in their countries

OVERALL

INFRASTRUCTURE

AIR

TRANSPORT

ELECTRICITY

SUPPLY

PORTS

ROADS

RAILROADS

7.0

BEST

Germany

6.5

6.0

U.S.

5.5

5.0

Britain

4.5

China

4.0

3.5

AVERAGE

’07

’15

’07

’15

’07

’15

’07

’15

’07

’15

’07

’15

Global executives opinions of infrastructure

in their countries

AIR

TRANSPORT

PORTS

ROADS

7.0

BEST

Germany

6.5

6.0

U.S.

5.5

5.0

Britain

4.5

China

4.0

3.5

AVG.

’07

’15

’07

’15

’07

’15

OVERALL

INFRASTRUCTURE

ELECTRICITY

SUPPLY

RAILROADS

7.0

BEST

6.5

6.0

5.5

5.0

4.5

4.0

3.5

AVG.

’07

’15

’07

’15

’07

’15

The New York Times|Source: World Economic Forum

Does Infrastructure Spending Lead To Growth?

Economists have provided vastly different estimates on how much infrastructure spending can be relied on to generate long-term economic growth. All sides, though, agree that the outcome depends in large part on the particular timing and location of the spending. In an earlier era, for instance, new roads vastly expanded the opportunities available to American businesses. Nowadays, spending on highways appears to come with significantly lower returns.

35%

Annual rate

of return from

investment in

highways

1950s

35%

1960s

16%

1970s

10%

1980s

Annual rate of return from investment in highways

1980s

1970s

1960s

1950s

10%

16%

35%

35%

The New York Times|Source: Federal Highway Administration

Smart Ways to Spend

For politicians, it is generally more attractive to spend money on new projects, with their ribbon cuttings and news coverage, than on the boring maintenance of existing roads and public works. Infrastructure experts complain that this has led to a persistent underinvestment in maintenance. New data, though, suggests that politicians and bureaucrats have become aware of the problem and are focusing more on important but unrewarding maintenance work.

Average annual state spending on road exansion and repair

(In billions)

2009-2011

2012-2014

EXPANSION

REPAIR

EXPANSION

REPAIR

$22.1

$16.5

$18.0

$23.4

Average annual state spending on

road exansion and repair

(In billions)

2009-2011

EXPANSION

REPAIR

$22.1

$16.5

2012-2014

EXPANSION

REPAIR

$18.0

$23.4

The New York Times|Source: Pew Charitable Trust analysis of Federal Highway Administration data

How to Fund It

The federal gas tax was set at 18.4 cents a gallon in 1993, and it has not been changed since. The fixed rate of the tax, along with the increasing fuel efficiency of American cars, has meant that gas tax revenues have not kept up with inflation and the costs of maintaining our roads. The federal government has had to chip in money from its general fund to make up for the shortfalls, but Congress has been reluctant to continue doing this. States and local municipalities are increasingly looking to tolls and user fees to pay for new roads and repairs.